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Old 08-15-2018, 04:31 PM
TryingToFigure TryingToFigure is offline
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Default Wendy Johnson A&O

Hi Everyone,

First time poster. Looking forward to be a part of.

Simple question about A&O ratios. I've used Wendy Johnson in reserving quite a bit. Would you consider it appropriate for A&O load for permissible loss ratio in pricing?

My gut feeling says no. Aside from accuracy problems in reconciling to reserving data, it feels like it might capture data you might not necessarily want to price for.

What do you think? I'm having trouble coming up with the best words.
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Old 08-16-2018, 04:15 AM
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Gabriel Gabriel is offline
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If you don't price for Adjusting & All Other expenses, how are you going to pay them?
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Old 08-16-2018, 12:22 PM
TryingToFigure TryingToFigure is offline
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There are many other methods. Historically we've just done a flat company wide load factor.

I'm just thinking of the appropriateness for Wendy Johnson for this information.
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Old 08-22-2018, 03:07 PM
youngorchard youngorchard is offline
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If you believe your data/methods are appropriate for reserving purposes, I don't see why you can't use the results based on the same data/methods for pricing purposes.

This would be the ideal approach to minimize methodology/assumption mismatch between pricing and reserving, which could potentially lead to significant reserve deficiencies (albeit relatively small compared to the larger loss reserves).
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Old 08-22-2018, 03:15 PM
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Marcie Marcie is online now
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I'm very rusty on the Johnson A&O reserving method, but doesn't it give you an A&O reserve amount across all prior accident/report years? I imagine you could use similar assumptions and calculations but you'd want to make sure you adjust it to end up with an A&O provision appropriate for just the proposed underwriting period.

What do you mean by "it feels like it might capture data you might not necessarily want to price for"?
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Old 09-10-2018, 12:18 PM
TryingToFigure TryingToFigure is offline
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Thanks for your replies.

Matching methods does make sense and A&O is not a huge part of reserves true. Just optimizing the decimals sometimes.

Yes it is a definite way to consider WJ by prior AY.

As for the the following quote "it feels like it might capture data you might not necessarily want to price for"? I'm worried about situational AY events or practices you don't want to price future policies according to. But any of the methods could be subject to the notion of events or practice changes.

Thank you again.
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